A team of corporate insurance attorneys from Fox Rothschild, including IADC member Carl A. Maio, gained approval from the State of New Jersey’s Department of Banking and Insurance (NJDOBI) to make Deborah Heart and Lung Center the 21st captive in New Jersey and the first non-profit 501(c)(3) on-shore captive in New Jersey.
Deborah, a not-for-profit hospital in Brown Mills, N.J. (Burlington County) and leader in the treatment of cardiac, vascular and pulmonary diseases in adults and children, will become one of the first hospitals to be able to provide comprehensive general liability insurance coverage for the center and medical/hospital professional liability insurance for its employees through a pure single parent captive. The captive, Deborah Medical Associates Insurance Company, LLC, became operational on January 1, 2016.
Captive insurance companies are insurers established with the specific objective of financing risks emanating from their parent group(s). Traditionally, most captive insurers are based offshore, but various states have revised regulations and adopted new laws to attract captive insurance companies. For example, New Jersey changed its state insurance laws by enacting the Captive Insurance Law P.L. 2011, c.25 in 2011. As such, New Jersey companies can now use the law to insure their risks in the state.
Fox’s Carl Anthony Maio and Sandra Romaszewski led the team through this transaction.
“When Deborah first approached Fox, they originally wanted to form offshore,” said Maio. “We assessed the situation and advised the hospital’s leadership team to form the captive in New Jersey, as forming it in the state where the hospital is domiciled is preferable to offshore. Given New Jersey’s commitment to expanding its captive market, the state was extremely receptive to Deborah forming a captive insurance company in state.”
“Working with the NJDOBI, Deborah executives and the hospital’s board of directors, the Fox team developed a legal and insurance plan to form the captive and handled the complex application and filing. The captive was approved in only four months which was quite an accomplishment,” said Romaszewski, a Fox senior associate who worked with Maio. “Many similar filings fail or turn to offshore venues where regulation is less substantive.”
Additionally, Fox assembled a team of outside actuaries from Milliman, a global consulting and actuarial firm, and selected Marsh, USA, a global leader in insurance broking and risk management, as the captive manager. Under direction of the Fox team, these external consulting groups undertook feasibility studies to assess critical mass, risk management, underwriting of medical malpractice, comprehensive general liability, liability policies and claims management for the hospital, staff, employed-physician practice groups and employed physicians.
“Applying decades of experience housed in Fox’s Captive Insurance Practice, we advised Deborah that transitioning from a self-insured trust to a captive insurance company will provide tremendous value and is an excellent risk management financing option,” said Maio.
Chair of the firm’s Corporate Insurance Department and Insurance Practice Group, Maio has an insider’s knowledge of the insurance industry. With more than 40 years of experience in its business, financial, and legal aspects, he focuses his practice on mergers, acquisitions, public and private transactions, licensure, formation of companies, holding companies, due diligence investigations, corporate governance, solvency, and the business of insurance advising Boards of Directors, among other matters. His clients include insurance and reinsurance companies, insureds, and corporations in the U.S., Canada, Europe, and offshore, including Bermuda, the Caymans, Barbados, and the London market.